A company made no adjusting entry for accrued and unpaid employee wages of $28,000 on December 31. This oversight would: A. Understate net income by $28,000. B. Overstate net income by $28,000. C. Have no effect on net income. D. Overstate assets by $28,000. E. Understate assets by $28,000.

Question

Business

Laylah Harrison

20 November, 16:25

A company made no adjusting entry for accrued and unpaid employee wages of $28,000 on December 31. This oversight would: A. Understate net income by $28,000. B. Overstate net income by $28,000. C. Have no effect on net income. D. Overstate assets by $28,000. E. Understate assets by $28,000.

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Alani Wilcox · Answer 1

B. Overstate net income by $28,000

Explanation:

Provided that

Unpaid employee wages = $28,000

Since no adjusting entry is made

So, it would overstate the net income and the expenses account too for $28,000 as no adjusting entry is passed that reduced the expenses account

Therefore, it will give impact two accounts i. e net income and the expense account. Both the accounts are overstated for $24,000